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FRANKFURT: Deutsche Bank and Commerzbank favor a straightforward merger over more complex ways to structure a deal, three people close to the matter said.

In their base case scenario, a transaction would be organized as a share offer from Deutsche Bank for Commerzbank, they said. That structure is preferred to the creation of a new holding company, which is viewed as too difficult to execute.

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"The holding structure is dead," one of the people said, referring to setting up a holding company that would buy Deutsche and Commerzbank in return for shares of the new bank.

Sources said last year that Deutsche Bank was examining creating a holding company structure amid speculation at the time that it could merge with Commerzbank.

Last month the two banks confirmed they were in talks about a merger. A preliminary decision on whether they want to go forward is expected within days.

The people cautioned that no decision has yet been taken on a potential deal structure and there is still no certainty that a deal will be struck at all.

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Deutsche Bank and Commerzbank declined to comment.

Regulators in the United States, Britain and Switzerland tend to favor the bank holding company structure, in part because it can help with the winding down of a troubled bank.

There has been a push since the financial crash to make banks easier to break up, lowering the risk that the problems of a troubled investment bank, for instance, could affect ordinary savers.

About 90 percent of U.S. banks, including Citigroup and JPMorgan Chase, operate as holding companies, according to the U.S. Federal Reserve.

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But converting to a holding company structure can be costly.

In Deutsche and Commerzbank's case, defining the relative value of the two banks for a holding structure would be more complicated than simply negotiating a price for a simple takeover, the sources said.

As part of a deal, Deutsche Bank will be asked by the European Central Bank to raise fresh funds to plug capital holes resulting from asset revaluations and expected restructuring costs, a person with direct knowledge of the matter said earlier this week.

Issues around regulatory capital - and how to make use of the fact that Commerzbank trades well below book level, which can be used to boost such capital - are a talking point between the two banks.

Other issues focus on synergies, job cuts as well as legal and tax issues, people familiar with the matter have said.

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